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January 19th, 2007

O Lord, won’t you buy me, an Apple iPhone

I con­fess. Mine is one of the ani­mated voices debat­ing the future of Apple in the mobile phone indus­try. But I’m the heretic deny­ing that we’re wit­ness­ing the birth of the Mobile Mes­siah. I have much love for Apple (even if sit typ­ing this on a Sony Vaio). They have a knack of dis­rupt­ing mar­kets through intel­li­gent and beau­ti­ful design. And the desir­abil­ity of their brand is sec­ond to none. So they should be well placed to thrive in the mobile phone busi­ness. Right?

At the risk of being burned at the stake, I believe not. There is noth­ing in the iPhone launch announce­ment to sug­gest it will cre­ate mar­ket dis­rup­tion. Sure, the iPhone looks beau­ti­ful. The user expe­ri­ence looks promis­ing (unless you like tex­ting one handed). And yes, it can do clever things. But noth­ing dis­rup­tive. Noth­ing to unset­tle the sta­tus quo in the way iTunes unset­tled the music indus­try. Noth­ing so dif­fer­ent that you can’t wait for the end of your con­tract before bin­ning your exist­ing hand­set. And noth­ing to war­rant the enor­mous pric­ing bur­den the iPhone will have to carry.

Apple are fac­ing stiff com­pe­ti­tion this time. Nokia, Motorola, Sam­sung and Sony Eric­s­son may not all have the cache of Apple, but they are much beefier brands than the rag bag of com­peti­tors Apple white­washed in the MP3 mar­ket. How­ever, my heretic view is not founded on the rel­e­vant strengths of phone brands (even though we do work for Nokia). It is based on the dynam­ics of the indus­try. Among Nokia’s many rea­sons for suc­cess are their rela­tion­ships with net­work oper­a­tors around the world, their supreme global logis­tics oper­a­tion, and their sheer econ­omy of scale. Apple have none of these. Some­one put me right here, but Apple are not exactly renowned for their part­ner­ship skills either? I can only imag­ine the scene when they realise the net­work oper­a­tors have a com­pul­sion for instruct­ing man­u­fac­tur­ers which fea­tures must go into their next product.

Of course, many of the faith­ful will queue overnight to sat­isfy their addic­tion to own all things shiny and Apple. At the launch, Mr Jobs proudly reminded devo­tees that there are 100 mil­lion iPods in the world. He omit­ted to men­tion the two bil­lion Nokia mobile devices in the world, with the Finns adding to them at a rate of 350 mil­lion in 2006 alone.

So if you guys in Cuper­tino aren’t real­is­ti­cally expect­ing to take on Helsinki, what are you expect­ing to do? Is this a defen­sive manoeu­vre against MP3 play­ers in phones? If it is, you are one tardy bunch of Cal­i­for­ni­ans. Or is it the real­i­sa­tion that much of your future busi­ness will be wrapped up in mobile computing…of which voice com­mu­ni­ca­tion is a crit­i­cal com­po­nent? Or are you hid­ing an indus­try dis­rup­tion up your sleeve which will yet turn the entire mar­ket upside down?

I guess what­ever your answer, it will be a reflec­tion of your faith.

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  • Pingback: O Lord, won’t you buy me, an Apple iPhone | iBIT

  • Nick Fletcher

    First up, great blog — smart think­ing and really well written.

    I just wanted to throw another thought into the mix. That of the soft­ware. Going beyond the eye candy and Jobs con­tin­ual “boom” out­bursts the fact that it was run­ning some form of OSX was the most sig­nif­i­cant announce­ment for me.

    Whether the iPhone as a device is a suc­cess or not runs a sec­ond to what they can do and will do with this ver­sion of OSX. The mind races.

    Paul, your thought about tak­ing on Helsinki is well made, but I am sure that they are not tak­ing on Helsinki. They have already said they only want to ship 10M in the first year or so. Even the most evan­ge­lis­tic macin­ista would have to admit that would hardly be a gnat bite on a small fleshy part of Nokia. What we don’t know is what suc­cess looks like for Apple. To judge them against the suc­cess and size of the estab­lished device man­u­fac­tur­ers is, I think, wrong. They are going for a dif­fer­ent mar­ket. In the same way that Apple nay-sayers com­pare a Mac Book pro to a Dell– it just misses the point. Apple is a high end man­u­fac­turer that con­trols the hard­ware and the soft­ware; and yes even the Ipod falls into that think­ing. You can still buy cheaper MP3 play­ers, is just that few peo­ple do. If Apple does dis­rupt the mar­ket it will be because it has raised the bar, just as it did with their com­put­ers, and their MP3 play­ers. That is what may cause worry in Helsinki or Water­loo, not that Apple is eat­ing their mar­ket share, but that there is some­thing bet­ter out there.

    As for part­ner­ships, again I take your point, but they didn’t do a bad job with the music indus­try, arguably they shifted the bal­ance of power from the indus­try to the dis­trib­uter. And they did that with­out pros­ti­tut­ing them­selves in the same way the Zune. Lets not for­get they just got the biggest US wire­less provider to a) keep the project secret and b) recon­fig­ure their net­work to allow for visual voice mail and c) doing all that for a prod­uct that didn’t even exist. Maybe they will change the bal­ance in the mobile device indus­try. We don’t know who will be the UK/Europe provider yet (any inside knowl­edge?), but I bet most would love to be the exclu­sive provider of the iPhone, and I bet they will also recon­fig­ure their net­works. I sus­pect that the rea­son they want the iPhone is not because they are going to sell mil­lions and mil­lions of the things, but because it is from Apple. Such is the brand power of the brand, and think­ing different.

    Nick